Tuesday, 30 December 2014

Mike Lawrie got the Christmas present he wanted this week
- a proposed settlement of the SEC investigation into accounting
irregularities between 2009 and 2012 in the Nordic region, Australia, and the
UK NHS contract.

The terms of the proposed settlement are less important
than the fact that a significant uncertainty - one which could
deter a potential buyer – will be closed, improving the prospects
of a sale of CSC.

As a result of the settlement, CSC will pay a penalty of onlyUS$190million
and initiate a review of its compliance policies.The
latter should have been done by now anyway. In ouropinion,
this “punishment” is little more than a tap on the wristfor CSC.

The SEC concluded that CSC should have booked theUS$1.16 billion
NHS impairment charge in FY2011 ratherthan FY2012. No surprise. We and others had reservationsabout CSC’s
handling of the NHS contract well before 2012.Following on from
this, CSC will also move the relatedUS$2.51 billion of goodwill impairment from FY2012 resultsinto FY2011.
The net income of FY2010 will also berestated downwards by US$50million reflecting the impact
ofthe Nordic
accounting irregularities.

Further details of the proposed settlement of the SECinvestigation
can be found here
or at;

Mike Lawrie has removed a significant balance sheet andearnings risk that arose well before his arrival at CSC.
He willlikely be
congratulated on having negotiated such a goodsettlement.

There is some restating of the timing of historical events, butno investor
is likely to care about that.

The shareholders who suffered between 2009 and 2012 nowsee their
investments worth over US$60 per share.

A number of employees directly involved in the irregularitieswere
reprimanded, suspended or terminated.

So is all well that ends well?

We think not !

The European and Corporate Presidents and otherexecutives
on whose watch these irregularities occurredhave not, as far as we
are aware, been held accountable for these failures. Instead, they were
richly rewarded, receiving large amounts in direct compensation and terminationpackages. The
risk of lawsuits against them is now almost certainly passed.

Meanwhile many honest hard-working employees who hadno connection
at all with any of these failures andirregularities lost their jobs in the aftermath. But who
caresabout them?

Thursday, 4 December 2014

A Wall St analyst covering CSC has said that the king has no clothes. At last!

According to an article in Washington Business Journal;Rod Bourgeois, founder of DeepDive Equity Research,

describes CSC as a
risky bet whose current value is between $33 and $40Our thanks
to the reader who told us about this article, which can be found here

Bourgeois knows CSC well, having previously followed them

as an analyst
for Sandford C Bernstein.He did not
behave

like a CSC groupie at the quarterly Analyst conferences, but nor did we hear him expressing much skepticism of CSC
pronouncements either.Maybe he is now
giving his own opinion instead of having to express the party line of his
former employer.

·Choppy cash flow, with recent
improvements being due to short-term factors such as tax and pension benefits

·Lack of specifics on the second
phase of the company’s turnaround plans.

Mr Bourgeois compares CSC turnaround efforts to those of

EDS, which
failed when the focus turned to revenue growth. He also feels that a CSC
takeover could be viewed as a desperation-move for an acquirer.

With a current price of around $66, there is a tremendous

risk involved
in CSC shares today, if one believes Mr Bourgeois’ thesis, which we do and as we have
said for some time.

We also wonder how confident other Wall St analysts are

with their employers’
official opinions and published target prices for CSC.Or now that Rod Bourgeois has said that the
king has no clothes, will other analysts start getting real?

All together now ............

The King is in the altogether, but altogether, the altogether
He's altogether as naked as the day that he was born
The King is in the altogether, but altogether, the altogether
It's altogether the very least the King has ever worn"

Tuesday, 2 December 2014

And it came to pass that when
the King was mocked by the Money Changers in The Temple for the treasury was empty and
the empire was shrinking – even into dust, in a rage he sent 200 mercenaries,
saying to them: 'lay waste to yet more of the lazy peasants in the villages for
they maketh little and cost too much. Doeth it and I will enrich you'

And these peasants were sore
afraid for they were blinded by Beelzebub who had closed their eyes to their goodness; pouring poisons into their
ears saying ‘there is no work and no where to hide - you are not of our grade’. And many, groaning with a
loud voice, said: ‘O Labour Market, receive us into thy bosom’. And lo many ads did suddenly appear in the vacancy pages and jobs were found – yeah even better
than those they had left, in lands flowing with milk and honey. And a light shone about them, for the angel of the
Market was with them, watching over them. They sung songs, and drank much in
thanks for their salvation.